Should You Collect Sales Tax When it is Not Required?

Not all businesses are required to collect sales tax, especially in jurisdictions where they have no nexus, but that doesn’t mean that your business shouldn’t. Selling hand-crafted clothes online? You might want to avoid collecting sales tax as long as you can. Selling an airplane or industrial equipment to a customer in another state? Your customer might appreciate your collecting the sales tax. It all comes down to whether your customer will have to pony up in the long run. Consumers are supposed to, but most buyers of ordinary consumer goods don’t, either because they don’t know they should or because they don’t keep records. Many states allow consumers to pay a fixed amount to be sure they’re covered.

For these customers, collecting sales tax won’t feel like a useful service. Purchases of larger items or items in larger quantities are another story. Using a sales tax filing software that makes it simple will allow you to give the added service of collecting sales tax so your customers don’t have to worry about it. While many businesses think that avoiding collecting sales tax will bring them customers because of the lower prices, it’s not always the case. When your customers are large entities that might be audited, the security, cost savings, and convenience of having someone else handle their sales tax for their purchases can be a selling point for your business. Businesses that have to pay sales tax on their purchases want to simplify their processes. It’s a lot easier for you to verify one sales tax rate for their location than it is for them to do use tax filing.

When businesses are pricing goods, a really savvy business will look at all the factors included in the purchase. Shipping times, overall cost, and quality are all obvious things businesses concentrate on. Collecting sales tax to simplify your customer’s life can be an added service you offer. You may need to point out the value to your customer. If you don’t collect the sales tax, your customer has to pay to calculate and file it as use tax — either in house or outsourced. Overall, not collecting sales tax can mean a higher total purchase cost for your customer even though the invoice price is lower. Instead of having to file use tax and ensure their affairs are in order in case of an audit, the customer can simply rely on you to provide the service.

Help your customers do the math and see how this service can save their time and money. What’s your cost for providing the service? If you’re already collecting sales tax for some customers, adding the service for others is very little extra effort. The process is very simple when you use the right sales tax filing software so there’s no reason not to collect and files sales tax software for all your taxable customers.

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